Bill Shorten faces Labor rift over company tax cuts

Bill Shorten has been sent a blunt warning from Labor’s left faction that it is opposed to business tax cuts.

Opposition Leader Bill Shorten in question time yesterday. Picture: Kym Smith

Bill Shorten has been sent a blunt warning from Labor’s left faction that it is opposed to business tax cuts as a matter of principle, setting up a showdown that may force the Opposition Leader to unwind tax cuts under a Labor government that are already legislated for millions of small businesses.

The warning followed the ­release of independent advice from the Parliamentary Budget Office confirming the government’s $65 billion enterprise tax plan would not affect the projected return to surplus by 2021.

With $25bn in cuts already legislated for businesses with a turnover of $50 million, Mr Shorten is faced with the prospect of an internal push to overturn them if Labor wins the next election, after a meeting of Labor’s left caucus yesterday resolved to oppose the ­entirety of the government’s plan.

Scott Morrison yesterday claimed small- and ­medium-sized businesses were ­already at risk of being robbed of any benefit of tax cuts, with figures revealing they relied on $550bn in domestic trade with larger companies that were being locked out of tax relief by Labor and the Senate crossbench’s refusal to pass the tax cuts.

“It’s not surprising to see Bill Shorten get rolled on economic policy, and turn his back on what he says he once believed in,” the Treasurer said.

“Under Bill Shorten Labor have lost their economic compass. Bill Shorten and Chris Bowen don’t know what they believe in anymore on economic policy.

“Labor are short-changing small and medium sized businesses by refusing to support our full plan to lower taxes on Australian business. Small businesses know that if we force larger businesses to pay more to the government that will mean fewer opportunities for them.”

The Labor left argued that it was opposed to the tax cuts under any circumstance as a “rejection” of trickle-down economics, setting up a split with Mr Shorten and his Treasury spokesman, Mr Bowen, who have left the door open to ­revisit company tax cuts when the budget could afford them.

But even this argument appears now to be undermined, with the PBO reporting yesterday that the government’s “company tax cut has been fully factored into the government’s budget projections’’.

The government is seeking to apply more pressure on the Senate to pass the rest of the tax cuts, which would drop the company tax rates from 30 per cent to 25 per cent for all business by 2026.

At this level, it would still be higher than other OECD countries, including Britain and the US, which has dropped its rate from 34 per cent to 21 per cent.

But the argument has not convinced One Nation leader Pauline Hansen, who said yesterday that while she was still talking to ­Finance Minister Mathias Cormann, she was not inclined to support the cuts, and cited global mining supplier ORICA as a source of her scepticism.

But the Australian multi­national yesterday rejected the suggestion that it was dismissive of the cuts being a driver for investment. ORICA chief executive Alberto Calderon reiterated the company’s support for the legislation. “We need a tax environment that is conducive to business ­investment and is competitive relative to the countries against which we compete for capital,” Mr Calderon said. “There should be much more discussion around the optimal combination to create the greatest benefits for society.”